Using proceeds from the Old Property...

Can I use proceeds from the sale of my Old Property for the earnest money deposit on my New Property?

Yes, but there's a trick to it. Here’s how it's done:

First, make sure that the purchase contract for the replacement property has already been assigned to the intermediary. Next, make sure the escrow instructions state that should the contract be terminated, the earnest money will be returned to the intermediary and not to you. At your direction, the intermediary will forward the necessary funds to the seller’s agent or title company.

Paying any other costs from exchange proceeds, such as loan application fees, appraisal fees and environmental study costs, can be very risky. You should discuss this issue with your intermediary before directing exchange proceeds to be spent in this manner.

--The Experts